New Zealand’s Inland Revenue has issued a private ruling confirming that proceeds from an insurance company’s proposed property sales were capital in nature and not taxable under Sections CB 1 and CB 6 of the Income Tax Act 2007.
New Zealand’s Inland Revenue issued Technical Decision Summary (TDS) 26/18 on 1 October 2026, addressing whether proceeds from an insurance company’s proposed sale of investment properties would constitute taxable income. The Tax Counsel Office (TCO) determined that the proceeds were capital in nature and that neither Section CB 1 nor Section CB 6 of the Income Tax Act 2007 applied.
The applicant, an insurance company within a wider corporate group, owned investment properties leased to other entities in the group for business operations. The properties were originally acquired for long-term holding to support the group’s operational needs, rather than for resale.
Income from a business
Section CB 1 applies to amounts derived from carrying on a business but excludes amounts of a capital nature. The TCO considered whether the proposed property sales formed part of the applicant’s ordinary business activities or represented the realisation of capital investments.
The TCO noted that the corporate group’s board made the decisions to acquire and sell the properties, rather than these decisions arising from routine insurance operations. The properties were not funded by policyholder reserves and were never intended to meet policyholder claims. The applicant also held sufficient liquid assets to meet those claims without relying on the properties.
The properties had been held as long-term capital assets, with no evidence of speculative monitoring or property-trading activity. The TCO therefore concluded that the sale proceeds were capital in nature and did not constitute income under Section CB 1.
Land acquired for disposal
Section CB 6 applies to proceeds from the disposal of land where the taxpayer had a purpose or intention of disposal when acquiring it. The TCO assessed the applicant’s intention at the time of acquisition, considering the circumstances and objective evidence.
The properties had been acquired to deploy surplus capital within the corporate group and establish a long-term leasing arrangement. The applicant derived rental income from the properties as part of its investment activities, and there was no pattern of land trading. The properties had also been held for several years before the proposed sales.
Based on these factors, the TCO concluded that the applicant had no purpose or intention of disposing of the properties when they were acquired. Section CB 6 therefore did not apply, and the proposed sale proceeds were not taxable under that provision.
The ruling clarified that the tax treatment of the proceeds depended on the circumstances of the property acquisitions and the applicant’s activities, including the original purpose of ownership and the absence of property-trading intentions.
